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Summary

The rejection of the long-standing US–European Safe Harbor agreement on digital data processing could help telecoms operators build share in the global cloud market. On October 7, 2015 the Court of Justice of the European Union (CJEU) ruled that the 15-year-old agreement was invalid. The US Department of Commerce’s Safe Harbor principles were designed to help US firms obtain and process European data. Under the system, US vendors self-certified that they had adequate data privacy measures in place to satisfy EU rules.

The complexity of digital compliance is a monetizable opportunity

Now, legal authorities in each EU member state must decide if US firms can send user data from Europe back to the US. However, it is unlikely that they will disagree with the CJEU’s decision. Consequently, millions of cloud services agreements between EU citizens and firms with US vendors will need urgent review.

Whatever the outcome, it is clear that managing digital security and compliance is becoming more complex on a global scale and that consumers and enterprises – particularly SoHos and SMEs – simply cannot keep up.

The role of “Expert Orchestrator” – securing, assuring, and managing multi-vendor, multi-cloud environments – is one of four core business models that Ovum has defined for telcos to profit in the cloud market. Growing investment in enabling technologies such as network functions virtualization and software-defined networking is improving telcos’ ability to monetize the management of data sovereignty rules and customers’ performance needs across different cloud workloads.

Telcos’ own data center estates may not rival those of AWS or Google in size or economics, but they are far more distributed geographically. This suggests that orchestration services can be sold both to enterprises and, under wholesale arrangements, to US cloud vendors that need in-country presence.

Trust in telcos is growing. A 2014 Ovum study of European enterprises cosponsored by BT and Cisco found that enterprises were already most likely to hand the management of their most valuable private cloud workloads to telcos.

In terms of SaaS, European operators have lower dependency on US vendors than their peers in other regions. Indeed, many telcos are investing in and promoting indigenous SaaS vendors to support local needs. In a global study of telcos’ SaaS portfolios, Ovum found that US vendors represented only 13% of SaaS resold by European telcos, compared to 17% by Asia-Pacific telcos, 25% by Latin America telcos, and 30% by Middle East and Africa telcos.

In truth, though, a small number of vendors generate the lion’s share of SaaS revenues. At the top of the pyramid are US-based blockbuster vendors such as Microsoft. In a cloud market that is fickle and demanding, the high ranking of many US cloud vendors is no accident or manipulation, but a reflection of product excellence meeting market demand. It is naive to expect an overnight shift away from established US cloud vendors due to the fall of EU Safe Harbor. Not least, enterprise ICT buyers might well ask: Why should we? The smart money is on those providers that can help cloud buyers avoid making compromises just to walk the line.

Appendix

Further reading

SDN/NFV: How Telcos Should Raise Their Profile with Users, TE0005-000736 (August 2015)

Framework: Telco Cloud Business Models, TE0005-000721 (July 2015)

When Cloud and Network Converge: Cloud Services Interconnect, TE0005-000727 (July 2015)

Author

Camille Mendler, Lead Analyst, Enterprise Services

camille.mendler@ovum.com

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